TLDR:
G7 average 10-year government bond yields rose over one percentage point between February and September.
Global public debt is projected to exceed 100% of GDP by 2030, the IMF warns.
US government interest payments could reach 5.7% of GDP in 2031, matching projected Social Security spending.
The IMF says reducing deficits and improving debt management are essential to limit future borrowing costs.
Global bond yields are climbing as governments face mounting debt and tighter fiscal constraints. The International Monetary Fund (IMF) warns that rising borrowing costs could worsen public finances and complicate efforts to stabilize debt.
Between February and September, the Group of Seven’s average 10-year government bond yield rose by more than one percentage point.
The average reached its highest level in nearly two decades. Meanwhile, global public debt is projected to exceed 100% of global GDP by 2030, a threshold last reached immediately after World War II.
Why Rising Bond Yields Are Increasing Global Debt Pressures
The IMF identifies several forces behind rising yields, including persistent inflation, higher oil prices, stronger investment demand, and expected growth linked to artificial intelligence. However, fiscal fundamentals remain central to the outlook.
High government debt, expanding spending needs, and expectations of substantial bond issuance are pushing up the returns investors demand. Higher yields in major economies can also spread across borders, increasing financing costs elsewhere.
The pressure is already appearing in government budgets. The effective average interest cost of government financing is projected to increase from 2.3% in 2021 to 3.7% by 2031.
The United States faces a particularly heavy burden.
Government interest payments are projected to rise from approximately 2.8% of GDP before the pandemic to 5.7% in 2031. That would roughly match projected Social Security spending, the country’s largest entitlement program.
Low-income countries face even tighter constraints. Interest payments currently consume more than 15% of their total fiscal revenues, compared with an average of approximately 9% between 2011 and 2019.
These payments leave governments with fewer resources for infrastructure, social programs, and economic support. They also restrict governments’ ability to respond to downturns or meet growing defense and energy security demands.
Rising bond yields are adding pressure on public finances already strained by debt approaching its highest since World War II. Putting fiscal policy on a credible path now can help contain borrowing costs and limit risks. Read more in the latest Fiscal Monitor blog:… pic.twitter.com/xDo0sx0Jyo
— IMF (@IMFNews) October 17, 2026
How Rising Bond Yields Could Complicate Debt Stabilization
The IMF warns that debt stabilization requires stronger fiscal balances when borrowing costs exceed expected nominal economic growth. Governments must generate larger primary surpluses or reduce primary deficits to prevent debt ratios from increasing.
However, the global primary deficit is projected to reach 3.3% of GDP in 2026.
Stabilizing the global debt-to-GDP ratio this year would require reducing that deficit to approximately 2.6%. Further adjustment of a similar magnitude would be needed in subsequent years as debt continues rising.
Debt maturity also matters. Governments refinancing more debt over shorter periods face faster transmission of higher policy rates into their borrowing costs. This creates a feedback loop between monetary policy, fiscal pressure, and market interest rates.
The IMF also cautions that favorable financing conditions for emerging markets may not last. A change in investor risk appetite could widen sovereign spreads and restrict access to international funding.
The report calls for credible medium-term fiscal plans, stronger debt management, improved tax systems, and more efficient public spending. Its central warning is clear: delaying fiscal adjustment could increase borrowing costs and force governments into more painful measures later.
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